FX – WEEKLY UPDATE :

Weekly SYNOPSIS: 16/05/2025

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Currency Map:

Currency Pairs	WEEK CLOSE	PRIOR WEEK CLOSE	% change
USD/INR	85.49	85.43	0.07
EUR/INR	95.95	96.28	-0.34
GBP/INR	114.03	113.40	0.55
JPY/INR	58.90	58.92	0

Brent Crude closed at USD 65.50 VS previous week close of USD 64. Gold closed at USD 3202. Nifty closed at 25019 vs prior week close of 24008. 10 Year G-SEC Yield is now at 6.32%.

Major developments: USDINR traded in the 84.62-85.73 range last week, and Rupee closed flat against USD w/w. EUR declined 0.34% w/w and GBP climbed 0.55% w/w against Rupee.

Indian benchmark Equity indices climbed 4.16% w/w. 10 Year G-SEC Yield closed at 6.32%.

1-year fwd premia is at 2.10% p.a.

FX reserves stood at USD 690 bn, as on May 9 th. Reserves climbed US D 4.5 bn w/w. Gold reserves, which also constitute part of the forex reserves, increased by $4.5 billion to $86.33 billion during the week.

In May, FII’S have  bought Rs 18446 Cr of Indian Equities and sold Rs 5682  cr of debt.

Rupee opened gap up last week, following ceasefire understanding with Pakistan. However, Rupee swiftly declined to 85.75 on Wednesday. Following are positives for Rupee: 1)Easing of border tensions, 2)FII inflows, 3)Moderation in Crude prices 4)Gain in Asian currencies, 5) Progress in US-India trade talks.

Rupee has a potential to gain as and when India concludes trade agreement with US. Despite all the above positives, if USD Index climbs, Rupee may track and decline.

Inflation declined to 6 year low of 3.16% in April as against 3.34% in March. Food inflation declined to 1.78% in April. RBI has projected CPI inflation at 4% for this financial year. IIP climbed 3% in March as against 2.9% in Feb. Mfrg grew by 3% and power sector climbed 6.3%. For 2024-25, IIP climbed 4%.

Indian April trade deficit expanded to USD 26.4 bn. It was USD 21.5 bn in March. Exports stood at $38.49 billion in April, while imports were $64.91 billion, compared with $41.97 billion of exports and $63.51 billion of imports in March. India’s oil imports rose to $20.72 billion in April from $19 billion in March. Gold imports fell to $3.1 billion in April from $4.4 billion the previous month.

On trade talks with US, there seems to be some friction. While US President claimed that India has offered Zero tariffs on US imports, EAM Mr.Jaishankar pushed back saying that nothing has been finalized. Investors remain edgy as trade uncertainty remains despite some progress/ rollback/pause.

Considering gains in Asian Currencies, Rupee’s decline may get halted below 85.90. Expect 85.05-85.70 range. Downside break of 85.05 would confirm that recent move to 85.80 is only a correction to the move from 87.94 to 83.78 range. However, if Euro slides below 1.1065, USDINR could break 86. Exporters and importers should be prepared to act, depending on the trend as markets remain volatile.

Hedging advise: Exports can be hedged on rally till 85.90 is not breached on the upside.

Global developments:  US and China agreed to bring down tariffs by 115%. US will levy 30% on Chinese imports and China will impose 10% on Chinese imports. This will be effective for 90 days. Global risk markets surged after the surprising breakthrough in US-China trade negotiations delivered results far beyond market expectations.

Global focus would continue to be on trade agreements by US with major countries/blocs.

US headline CPI rose just 0.2% mom, below the expected 0.3% mom. Core CPI, excluding food and energy, also increased by 0.2%, undershooting forecasts of 0.3% mom.

On an annual basis, headline inflation eased to 2.3% yoy from 2.4% yoy, the lowest rate since April 2021. Core inflation held steady at 2.8% yoy, in line with expectations.

German and EU Zew sentiment surged on trade optimism and stabilizing inflation.

UK economy expanded by 0.7% qoq in Q1, slightly ahead of expectations at 0.6% qoq.

Currency technical levels: USDINR: 85.05/84.60 (Supports), 85.90 (resistance),

EURINR:94(Support), 96.10 (Resistance)

GBPINR: Supports: 111.50( supports), Resistance:114.60(Resistance).

JPYINR: Resistance:59.10 Supports: 57 (support).

Hedging advise: USDINR receivables be hedged till 85.90 is not broken on the upside. EUR payables be covered on climb above 96.10.  GBP receivables can be covered at 114.50+.